Mr. Iain Duncan Smith (Chingford and Woodford Green):
I start by thanking the Prime Minister for his statement and I join him in offering the Opposition's condolences to the Russian people for the terrible tragedy that they faced during the past few days. I also join the right hon. Gentleman in expressing our horror at the actions of terrorists in Moscow and in extending our sympathies to all the victims and their families.

As the Prime Minister said, hostage taking and terrorism are utterly unacceptable whenever and wherever they occur. I also agree that a huge and terrible dilemma faced the Russian President. No matter what we discover during the next few days and weeks, it was no less than one of the most difficult decisions that could have been made, although in due course we shall need to understand more fully exactly what weapons were used. Our condolences go also to the family of the US diplomat. As the Prime Minister rightly said, those events bring home to us the fact that the war on terror must continue and that those who say that we can take a break from it, or that we do not need to pursue it with so much vigour, are fundamentally wrong. They must remain on the sidelines of the argument.

On Europe, I congratulate the Danish presidency on keeping EU enlargement on track. The Prime Minister is right to say that enlargement is a great prize that is

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worth fighting for. The 10 new countries seeking membership of the EU will bring 70 million customers for British goods and services in a single market extending from the Atlantic to the Baltic. The prospect before us is of a new Europe built on co-operation between stable democratic nations and the prosperity of open markets[Interruption.] I know open markets make Labour Members very uncomfortable but they will have to live with them.

The choice will be between an old Europe that is always seeking to centralise power or a new Europe that is apparently about open markets and less regulation. In that context, it is a pity that the Prime Minister allowed the forces of old Europe to sideline him so convincingly at Brussels. Only four months ago, he told the House of the EU's commitment to breaking down the trade barriers, including those in agriculture. Yet he comes back from the summit saying that it was fortunate that France and Germany reached agreement. Well, if ever there was spin to cover failure, that was it. The Prime Minister welcomes a reduction from a position that should never have existed in the first place.

If the deal after Friday is so welcome, why was the Prime Minister storming around on the sidelines of the meeting saying that he was furious and angry. Apparently he even insulted President Chirac[Interruption.] Terrible![Interruption.]Oh yes, be careful; he will be joining us.

If the deal was so welcome, why were British officials unable to comment on the details of the deal between France and Germany for about 24 hours from the moment they arrived? Was that not because neither the Prime Minister nor his officials knew anything at all about the deal because they were not present in the first place? How does that square with the fact that, six months ago, the Prime Minister told the House:

XBritain is in there, shaping Europe's future . . . We will continue to get the best for Britain out of Europe. Under this Government, the days of weakness and isolation will not return"?[Official Report, 18 March 2002; Vol. 382, c. 23.]

The Prime Minister said that reform of the common agricultural policy remains on the agenda. I assume that he means that reform is on the agenda in the same way as his colleague in No. 11 Downing street believes that leadership of the Labour party remains on the agenda for him.

Will the Prime Minister tell us what the total cost of the CAP will be after enlargement and how he will pay for it? [Interruption.] Labour Members hate the idea that the nonsense they have been pushing that they are at the heart of Europe has been exposedthey are not.

Will the Prime Minister tell us about the total cost of the CAP after enlargement and how it will be paid for? Will the money be found by cutting existing EU budgets? If so, why has so little been done to reform the EU structural funds and why did the Prime Minister not raise the fact that about #3 billion of the EU budget is still wasted in fraud and mismanagement?

The Prime Minister has made much of the fact that the British rebate did not make it into the presidency conclusions, yet President Chirac even today continues to state publicly that it is part of the deal. So will the Prime Minister confirm what we believe his Foreign Secretary said last week? [Interruption.] Oh yes. He said that the rebate won by Mrs. Thatcher is not up for

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negotiation and never will be up for negotiation. If the Prime Minister agrees with that, when did he first tell President Chirac that he should drop the whole issue of the rebate; or did he ever tell him at any point during the conference?

Only two years ago, the Prime Minister assured the British people that the charter of fundamental rights would not impact on national law, yet his former Minister for Europe said that Britain would be prepared to compromise on allowing the CFR to be legally binding. So in the light of the report that was tabled at the meeting on the convention and given at the Brussels council, will the Prime Minister make it absolutely clear that Britain will veto any proposal to compromise and make the CFR in any way legally binding?

I have lost track[Interruption]of the number of times that the Prime Minister has come to the House. [Interruption.] Oh no. Again and again, we hear that this country is leading for Britain in Europe, but seldom has his failure to practise what he preaches been so transparent: a deal to extend the life of the common agricultural policy has been struck behind Britain's back; proposals to give away yet more powers from national Governments to the Commission have been tabled over British objections; and fundamental reforms that would secure the financial future of an enlarged European Union have been passed over despite the warnings.

The Prime Minister normally gets up at this point and lectures everybody about how he has been ahead of everybody else in leading for the Government. Instead of getting up and blaming the last Government or the Opposition, will he now tell British taxpayers how much more they will have to pay to foot the bill for his failure?

The Prime Minister:
First, on Russia, we are in agreement. May I echoI should have referred to it in my statementthe right hon. Gentleman's praise of the Danish presidency? It handled a difficult meeting extremely well and prepared the Council very well indeed, and the Danish Prime Minister's handling of the summit was excellent.

In relation to the agreement between France and Germany, I have to point out to the right hon. Gentleman that there are two quite separate aspects of the agreementone was an agreement about limiting expenditure in the European Union. That is actually an advance on what was there before. Before the summit, there was no agreement that, after 2006, spending on agriculture should be limited at all. That was one aspect of the French-German deal, which was struck as a result of the disagreements between them.

There was then a second aspect: what France wanted in return for that deal was the abolition of any possibility of common agriculture reform prior to 2006. That is precisely what was resisted at the summit. That is why it was important to make sure that, after the summit, the mid-term review of the Agriculture Council continued. The purpose of the French proposals was to ensure that that review was effectively dead in the water. That review now carries on, and, as the EU Commissioner said in his statement today, it is important that the mid-term review is there, and it

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should be completed at the earliest possible opportunity. [Interruption.] With great respect, whatever is shouted at me from the Opposition Front Bench, we are fully supportive of the first point of the agreementan additional limit on expenditure. We are not in support of the price for itno CAP reformand that was defeated at the summit.

Secondly, of course, it is extremely important to ensure that the European Union can make a proper commitment in the Doha WTO round. If we had ended up saying effectively that there would be no CAP reform prior to 2006, it would have been very difficult to make a constructive EU offer next year. I want to make it clear that I believe that it is in the interests not just of Britain but of Europe that we are able to make an offer in that WTO trade round that is of benefit not just to the developed world but to those poor and developing countries that desperately need access to our markets.

That is the importance of CAP reform. The reason why it is important that CAP reform is still on track is that the decisions on it will not be taken in the Prime Ministers' Council but in the Agriculture Council. That is important because the Agriculture Council will take its decisions by qualified majority voting.

In relation to the abatement, it is not up for grabs, for a very simple reason: the abatement compensates Britain for what would otherwise be a wholly unfair distribution of contributions. Even with the abatement, our contribution is three times that of France, for example, and without it our net contribution would be 13 times that of France. Only after enlargement, even with the abatement, will our contributions for the first timeas a result of the deal struck in 1999 at Berlincome into line with those of France and Italy. It is therefore extremely important that we maintain it. As for French designs on it, that is a classic example of how Britain must take a sensible view. Of course, the French will want to take action against the British abatement, just as we want to take action on the common agricultural policy. They will make their position clear, and we will make ours clear; that, I am afraid, is the way that things happen. What is absurd, however, is to take the view that, just because there is an attack on the British abatement, we must give it up. We held firm at Berlin, when the Conservative party was telling us that we were going to give it up, and we will hold firm again.

In relation to the right hon. Gentleman's points about the charter of fundamental rights, we have made it absolutely clear that it should not extend the legal competence or jurisdiction of Europe in any way at all.

In relation to the issues that he raises about leadership in Europe, it is, of course, important that the Conservative partywhich, effectively, has an anti-European positionsays that Britain loses all the time in Europe. It must say that Europe is essentially something done to Britain against our interests and our designs. The shadow Leader of the House is nodding, unsurprisingly. [Hon. Members: XAgain!"] The shadow Deputy Prime Minister is nodding, too, as well as one or two others with an eye to the main chance. On economic reform, European defence and the future of Europe, I believe that, with other countries, we play a key leadership role. The right hon. Gentleman's problem is that, in order to make the case against Europe, he must always say that we are losing in Europe. In fact, Britain is not losing in Europe; Britain is gaining through a

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constructive attitude in Europe. I say unhesitatingly something that he did not say: our membership of the European Union is in Britain's interests, and we will carry on playing our full part in Europe because it is the right thing to do.

As for the right hon. Gentleman's comments about the leadership of political parties, if he wants a piece of free advice, he should not raise that topic again.